A county council’s award of a £104m children’s services contract to Virgin Care would “significantly” undermine the incumbent NHS trusts’ ability to maintain other services, a judge has said.

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Health Service Journal reports that in a court hearing Lancashire Care Trust and Blackpool Teaching Hospitals Foundation Trust warned Mr Justice Fraser that missing out on a children’s public health contract would cost them more than £2m and result in the loss of 160 staff.

The trusts allege the council failed to apply the scoring criteria correctly, and other errors and deficiencies occurred during the bid evaluation process. The main services covered by the tender are health visiting and school nursing.

Last month the Technology and Construction Court dismissed an application from the council to lift the automatic suspension of a contract award, which comes into effect when a challenge is launched, and further details of the case were published in the judge’s summary earlier this month.

The decision was made ahead of a full trial, due to be held in spring, unless another solution is found. This trial would decide if the council’s procurement process was flawed.

When considering whether to accept the council’s application to lift the automatic suspension of awarding the contract to Virgin and award damages to the trust, Mr Justice Fraser highlighted that would cause damage to associated services provided by the trusts.

He said: “The evidence served for the trusts makes it clear that the trusts only recently restructured their operations to deliver these services, and if they lose the procurement the trusts will have to significantly restructure their operations a second time.

“This is a restructuring of delivery of healthcare across the population, and what are called ‘pathways’ which are delivery routes through which healthcare is supplied.

“In addition to the cost and disruption that will cause – which I find would be considerable – the loss of the contract will make it more difficult for the trusts to deliver other similar public services which they are contracted to deliver, and these will require new pathways to care to be developed.”

He said the “effect upon both trusts goes far wider than simply those aspects to which a money figure can be attributed”, and cited an example given by one of the trusts that “lifting the automatic suspension would also result in the loss of senior staff who currently manage the full range of children’s services provided across all contracts”.

The judge said: “These are precisely the sort of effects, in my judgement, that cannot be compensated for by damages.”

His summary also reveals that the difference in the prices offered in the two bids was just 0.07%, and Virgin’s bid was considered narrowly better. The trusts took on the services in 2015 without a procurement being run.

The council had tried to argue that, as the current contracts with the trusts had not been established through a procurement, it could be illegal for the council to continue to use the trusts as providers of the service until the case is concluded.

This was rejected by the judge, who said: “It would be odd… that if the council were in breach of its legal obligations in awarding the existing contracts to the trusts, it could rely upon its own breach in this respect and be in a stronger position concerning its application than if it had not been in breach of the regulations in the first place.

“I consider the evidence from the council on this point to be a little muddled.”

In his ruling, he also urged the parties to “strive to save the collective public purse unnecessary expenditure on legal costs”.

Hempsons, which represented the trusts, said this followed an application by the NHS proivders to the court to order the council to disclose documents about the evaluation of Virgin’s bid, which the council had earlier refused to disclose.

Past and present presidents of the Association of Directors of Children’s Services have warned against incessant cuts to local authority budgets and highlighted the clear impact of austerity on children and their families.

Mandatory reporting of child abuse will not be introduced as it could undermine practice and result in tick box approach to the way important safeguarding work is carried out, the government has announced today.

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